When it comes to bankruptcy, debtors generally can choose between Chapter 7 or Chapter 13. While Chapter 7 is often the preferred choice and the most popular, not all debtors will qualify for this chapter. Learn more about the differences below and when it is appropriate to file for a specific chapter.
Chapter 7 is known as liquidation bankruptcy, which eliminates most of an individual’s unsecured debt and is a relatively quick process. The bankruptcy trustee will sell certain nonexempt property in order to repay your creditors.
Chapter 13, on the other hand, requires repayment of debt over a period of time. These payments are typically negotiated into manageable monthly payments and paid using your disposable income.
Chapter 7 can take anywhere from three to four months to complete, after which an individual can walk away debt free.
Chapter 13 repayment plans can last from three to five years. Once all payments have been made and all requirements met, most of the remaining unsecured debt will be discharged.
Chapter 7 is restricted only to those with income below the median average in their state. To determine eligibility, a debtor must pass the means test. If you have discharged debt in a Chapter 7 bankruptcy within the past eight years, then you may not be eligible.
Chapter 13 limits the amount of unsecured debt to $383,175 and secured debt to $1,149,525 as of the year 2016.
Chapter 7 can temporarily stop foreclosure and allow you to keep your home if you remain current on your mortgage payments.
Chapter 13 can halt a foreclosure and allow you to make up overdue mortgage payments through a repayment plan.
Chapter 7 bankruptcy is typically ideal for those who:
Chapter 13 bankruptcy may be a better option for those who:
It is always a good idea to discuss your debt relief options in detail with an experienced attorney. At Belsky, Weinberg & Horowitz, LLC, our Baltimore bankruptcy attorneys can review your debt and provide you with an analysis as well as what you can expect once you file for a specific chapter of bankruptcy.
Call (410) 234-0100 to reach our legal team.